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KPMG recommends strategic fiscal measures to strengthen Hong Kong’s competitiveness
Broadening the sources of income and minimizing expenditures, and attracting businesses and talent
Broadening the sources of income and minimizing expenditures, and attracting...
18 February 2025, Hong Kong (SAR), China (“Hong Kong”) – KPMG recommends that the Hong Kong Government introduce measures in its upcoming Budget to broaden income sources and optimise expenditures. Additionally, supporting the development of an innovative and digital economy will help attract enterprises and talent. This will thereby strengthen Hong Kong’s position as one of the key international finance centres.
KPMG forecasts the Hong Kong Government will record a fiscal deficit of HKD 89.7 billion for 2024-2025. This is primarily due to the less than expected land-related and stamp duty revenues. Further, KPMG estimates that Hong Kong’s fiscal reserves will remain at a relatively healthy level, projected to be HKD 645 billion by the end of March 2025. In view of the uncertainty from the external economic environment and the evolving geopolitical tensions and trade conflicts, the firm believes that the Government should broaden its income source and optimise its spending, and continue to attract businesses and talent to maintain the city’s medium to long-term competitiveness while ensuring financial sustainability.
John Timpany, Head of Tax in Hong Kong, KPMG China, says,
Hong Kong’s competitive tax rate and simple tax system continues to be attractive compared to many other jurisdictions. However, it is crucial to broaden the sources of government income and minimise expenditures through various measures including a comprehensive review of the tax system. Given the evolving international tax landscape and the fact that no comprehensive review has been conducted for many years, this review should include an examination of the city’s tax framework, and existing concessionary measures for specific industries and working families to enhance Hong Kong’s competitive edge.
To broaden the sources of income, KPMG suggests reviewing and adjusting government fees and charges, including the Air Passenger Departure Tax from HKD 120 to HKD 150, which has not been adjusted since 2003. Additionally, KPMG proposes to explore the feasibility of imposing a tax on Non-Hong Kong Resident Digital Service Providers at a rate of 2-4%.
On the expenditure side, KPMG advocates revisiting “the $2 Scheme”, such as imposing a fee cap of HKD 200 for a subsidised amount per month. This could encourage the subsidised elderly individuals to spend their allowance wisely while continuing to support silver economy.
Alice Leung, Tax Partner, KPMG China, says,
To further enhance Hong Kong’s attractiveness as a premier destination for family office and wealth management, we recommend expanding the scope of qualifying transactions for tax concessions to include digital assets, antiques, and art pieces.
Stanley Ho, Tax Partner, KPMG China, says,
The presence of regional headquarters is crucial for driving economic growth, as well as strengthening Hong Kong’s role as an international shipping and financial centre. KPMG recommends that the Government accelerate enhancements to maritime tax concessions and continue promoting the city as a stepping stone for asset management firms expanding in Asia Pacific through Hong Kong.
Chi Sum Li, Head of Government & Public Sector in Hong Kong SAR, KPMG China, says,
Broadening revenue sources and optimizing expenditures should go hand in hand with policies that enhance social welfare, improve public services, and foster a more inclusive economy. To support local business and livelihood, KPMG suggests providing tax allowance of HKD 50,000 to working parents who care for children aged 16 or below, or disabled dependents through grandparents or domestic helper, to help ease their financial burden. Additionally, we recommend a reduced ad valorem stamp duty rate to assist first-time homebuyers covering residential properties with value below HKD6 million.
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